RAMESHKUMAR TAGRAJJI JAIN,MUMBAI vs. ITO, WARD - 19(3)(1), MUMBAI
What did the Tribunal hold?
The Tribunal held that while the assessee failed to prove the genuineness of purchases, the estimated profit of 12.5% was on the higher side. The addition was restricted to 6.5% of the bogus purchases.
What were the facts?
The assessee, a trader in metals, was found to have obtained bogus purchase bills. The Assessing Officer made an addition by estimating a profit of 12.5% on these purchases, which was confirmed by the CIT(A).
What were the issues?
Whether the estimation of profit on bogus purchases by the revenue authorities was justified, and if not, what would be a fair estimation.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(1)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. Simit P. Sheth1,465 citing356 ITR 451 · 2013 · HC
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: VIKAS AWASTHY
सुनवाई क� �त�थ/ Date of hearing : 30/12/2020 घोषणा क� �त�थ/ Date of pronouncement : 25/03/2021 आदेश/ ORDER PER VIKAS AWASTHY, J.M: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-7, Mumbai [in short ‘the CIT(A)’] dated 27/09/2018 for the assessment year 2009-10.
This appeal is time barred by 119 days. The assessee has filed an affidavit giving reasons for delay in filing of the appeal. After examining the contents of affidavit, I am satisfied that the delay in filing of appeal is not wilful or deliberate, but has resulted for the bona fide reasons cited in affidavit. The Hon’ble Supreme Court of India in the case of Ram Nath Sahu Ors. vs. Goberdhan Sao & Ors. reported as 2002(3) SCC 195 has held that acceptance of explanation furnished should be the rule and refusal an exception more so when no negligence or inaction or want of bonafide can be imputed to the defaulting party. Thus, in the light of facts and the law laid down by Hon’ble Apex Court delay of 119 days in filing of the appeal is condoned and the appeal is admitted for disposal on merits.
Shri Prakash Shah appearing on behalf of the assessee submitted that the assessee is engaged in trading of ferrous and no-ferrous metals. The assessment in the case of assessee for assessment year 2009-10 was reopened on the basis of information received by the DGIT (Inv.) Mumbai from the Sales Tax Department, Government of Maharashtra. As per the information received, the assessee had obtained bogus purchase bills to the tune of Rs.84,23,315/- from various (seventeen) hawala dealers. In order to prove genuineness of purchases during assessment proceedings, the assessee furnished copies of bills, quantitative details of the stock and sales, bank statements evidencing payments made to the dealers ledger of alleged hawala dealers, etc. The Assessing Officer after examining evidences furnished by the assessee made addition on account of bogus purchases by estimating GP at 12.5% of the alleged hawala purchases.
Aggrieved by said addition, the assessee filed appeal before the CIT(A) against the Assessment Order dated 18/3/2015 passed under section 143(3) r.w.s. 147 of the Income Tax Act,1961 (in short ‘the Act’). The CIT(A) without appreciating facts of the case and documents on record confirmed the addition made by the Assessing Officer. The ld. Authorised Representative submitted that the CIT(A) has failed to consider GP of 2.93% declared by the assessee. Estimation of GP by the Assessing Officer and the CIT(A) is very much on the higher side. 2
Per contra, Shri Sushil Kumar Mishra, representing the Department vehemently defended the impugned order and prayed for dismissing appeal by the assessee. The ld. Departmental Representative submitted that the assessee failed to discharge his owns in proving genuineness of purchases and the dealers. The Assessing officer after considering the facts of case and the judgement of Hon’ble Gujarat High Court in the case of CIT vs. Simit P Sheth 356 ITR 451 restricted the addition to 12.5%. The estimation of GP by the Assessing officer and the CIT(A) at12.5% is fair and reasonable.
Both sides heard, orders of authorities below examined. The assessee is a trader in ferrous and non-ferrous metals. Undisputedly, the assessee has failed to substantiate genuineness of the purchases, as well as the dealers. At the same time turnover declared by assessee has been accepted by the Assessing Officer. Where the sales have been accepted, it is the profit element embedded in bogus purchases that has to be taxed. I am of considered view, that estimation of GP at 12.5% by the Assessing Officer and the CIT(A) is on higher side. Generally, the GP in trading of ferrous and non-ferrous metals range between 5% to 8%. The assessee has declared GP of 2.93%. Taking into consideration entire facts of the case, addition on account of bogus purchases is restricted to 6.5% of such purchase. The impugned order is modified and the appeal of assessee is partly allowed.
In the result, appeal by the assessee is partly allowed in the terms aforesaid.
Similar judgments
Other orders that rely on the same authority or decide the same section.
- Rudra Global Infra Products Ltd., Bhavnagar vs The ACIT, Circle-1, BhavnagarAhmedabad17 Jul 2025Partly Allowed
Also relies on CIT v. Simit P. Sheth
The Tribunal held that while the purchases were found to be non-genuine, the entire amount could not be added back. Citing various judicial precedents, it was decided to restrict the disallowance to a percentage of the a...
- Lavina Gwalani, Mumbai vs ITO, Ward 22 (2)(3), MumbaiMumbai2 Sept 2021Partly Allowed
Also relies on CIT v. Simit P. Sheth
The Tribunal, considering the facts and judicial pronouncements, decided to restrict the disallowance of non-genuine purchases to 8% for both assessment years.
- Shri Hasmukh J. Ruparelia, Mumbai vs ITO Ward-22(1)(5), MumbaiMumbai1 Jun 2020Partly Allowed
Also relies on CIT v. Simit P. Sheth
The Tribunal upheld the disallowance of purchases from suspicious dealers but reduced the estimated profit rate from 12.5% to 8% on the alleged bogus purchases.
- M/S Hbd Machines Manufacturing Corpn… vs ITO Ward 18(1)(5), MumbaiMumbai20 May 2020Partly Allowed
Also relies on CIT v. Simit P. Sheth
The Tribunal found that while the assessee failed to conclusively prove the genuineness of purchases, the AO also did not conduct thorough investigations. Following precedents, the Tribunal directed the AO to estimate 12...
- Laxman D Daware, Mumbai vs ITO 19 (2)(1), MumbaiMumbai30 Sept 2019Partly Allowed
Also relies on CIT v. Simit P. Sheth
The Tribunal held that the reopening of assessment was valid as it was based on tangible material. Regarding the profit estimation, the Tribunal reduced the profit element to 5% of the alleged bogus purchases.
More judgments on Section 147
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Tarunaben Maganlal Bhut, Navagam vs ITO Ward 2(2)(1), RajkotITA 673/RJT/2026[2024-25]Status: Disposed21 Oct 2026AY 2024-25
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
Latest GST High Court judgments
Search GST case law →- M/S B.K. Agency Under The Proprietor Of Bhola Prasad vs. The Chief Commissioner, CGSTPatna · 2 Nov 2026
- R.K.Service Station, Balasore vs. Commissioner CT And GST Odisha, CuttackOrissa · 31 Oct 2026
- Tankala Soumya vs. Assistant Commissioner Of State Tax, CT And GST, Rayagada Circle, RayagadaOrissa · 31 Oct 2026
- M/S Pooja, Town Hallroad, Cuttack vs. State Tax Officer, Cuttack-I West Circle,CuttackOrissa · 31 Oct 2026
- M/S Chicvogue Fashions Lip, Ganjam vs. State Tax Officer Bhubaneswar- Ii CircleOrissa · 31 Oct 2026